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Bitcoin, Considered and Reconsidered

As for your time, what do you make a day if you don't successfully mine anything? That's what I thought. We just valued time. Seriously though, the only reason you would invest your time "mining" is because you could get free, bitcoins. The only reason these bitcoins have value is because of the synthetic cap!!! No arbitrary cap, and you wouldn't waste your time.

Ha-ha. It's up 50 bucks today!

While I said I don't get why people would treat this as a currency, the larger point was questioning whether or not a monopolistic inefficiency was being created due to the marginal cost of production and the placement of the arbitrary cap in production, thus placing a dead weight cost on the buyer. The point was that something was getting lost in translation between the economic world (where scarcity is a bedrock principle) and the virtual world (where scarcity does not exist and thus we must manufacture it in order to create economic value). This is a very interesting question to consider because it resonates well beyond bitcoin. Could even have implications for how we interpret the Sherman Act.

If you want to buy bitcoin, go nuts! (Of course, I reserve the right to think you already have...)

Must Read: Morici: Obama Budget Offers Little Relief from Jobs Drought

How can there be a "monopoly" if no one person or company owns it?

This is a very good question. But I would ask back: Are we concerned with monopolies because one company extracts extra profits? Or are we concerned with monopolies because of the dead weight burden they place on market participants? If the latter, it doesn't matter.

Stop calling the limit on supply "arbitrary." It is based on math!

No, I will tell you where math determines value of something. Levered exchange-traded fundss. There is an inherent design flaw there that ensures, given time and volatility, that their price will asymptotically approach zero. Math determines value there.

Now, where math comes into the equation with bitcoin mining is because there was a desire to manufacture scarcity. Ever increasing math difficulty does the trick. Could have just as easily been improvements in the world's fastest time for the mile. Would have limited the supply just as well.

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